Given that 14 of the projects funded in this round are at the pilot-scale, with most projects receiving about $20 million to $25 million each, it’s clear that the DOE is willing to invest small chunks of funding in relatively early stage technology. Six-year-old Solazyme, one of the leaders in the algae fuel space with almost $80 million in venture capital backing, received a grant of a little under $22 million, but doesn’t expect to commercialize its technology until the 2012-2013 time frame. The DOE didn’t fund companies in the cellulosic ethanol industry that are the furthest along in their commercial deployment, like Range Fuels, Verenium and POET.

In addition to the 19 grants for projects, Agriculture Secretary Vilsack announced that the USDA plans to award algae fuel company Sapphire Energy a $54.5 million loan guarantee for its algae biorefinery project to be built in Columbus, New Mexico. That guarantee comes under the Biorefinery Assistance Program created in the 2008 Farm Bill. Sapphire Energy has some pretty grand ambitions. The company was founded in 2007 and says it is ramping up its algae fuel production estimates to 1 million gallons of algae-based diesel and jet fuel per year by 2011. By 2018, Sapphire says that it will crank out up to 100 million gallons per year, and by 2025, that number will soar to 1 billion gallons per year. That would be about 3 percent of the total amount of renewable fuels that the U.S. has mandated for production by 2025.

One thing to remember, even though the U.S. government is handing out $600 million for advanced biofuels, this funding pales in comparison to the $4 billion allocated for the smart grid buildout, and the billions being handed out for advanced green car loans. A big question to consider is how far this funding can take some of these firms — given that commercialized advanced biofuel plants can cost hundreds of millions to a billion dollars to build, a $25 million grant for a pilot project will only help move that plant partway to the next stage.